Category Archives: Inflation

The Namibian annual inflation rate slowed considerably to 2.1% in January, following the 2.6% y/y increase in prices recorded in December. Prices in the overall NCPI basket increased 0.6% m/m. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in January than in December, while the other eight recorded slower rates of inflation. Prices for goods increased by 2.6% y/y while prices for services increased by 1.3% y/y.

Transport, the third largest basket item, was the largest contributor to annual inflation, accounting for 0.7 percentage points of the total 2.1% annual inflation rate. Transport costs increased by 0.2% m/m and 5.0% y/y. The purchase of vehicles subcategory saw price increases of 4.6% y/y, while the operation of personal transport equipment subcategory recorded price increases of 6.1% y/y. Fears of the global economic impact of the coronavirus has pushed the price of Brent crude oil down 11.9% in January to around US$58 a barrel. Although it is unlikely for the oil price to remain at current levels in the long run, the lower oil price does at least mean that the likelihood for transport inflation to increase substantially in the short term is low.

Food & non-alcoholic beverages, the second largest basket item in weighting, accounted for 0.4 percentage points of the total inflation figure. Food and non-alcoholic beverage prices increased by 2.1% y/y, ticking up from inflation of 1.7% y/y recorded in December. Prices in twelve of the thirteen sub-categories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 13.8% y/y and vegetables which increased by 8.4% y/y. The meat sub-category meanwhile saw a marginal price decrease of 0.5% y/y in January. Rainfall figures have so far been mixed, with the northern and eastern regions receiving normal- to above-normal amounts of rain, and the central and southern regions receiving below-normal amounts of rain. Should these regions continue to experience poor rainfall for the rest of the rainy season, local food production will be affected which could lead to higher food price inflation.

Alcoholic beverages and tobacco prices, making up approximately 12.6% of the overall inflation basket, was the third highest contributor to the annual inflation rate in January, with prices of the basket item increasing 0.1% m/m and 2.6% y/y. The main driver in this basket category was alcohol prices which increased by 4.4% y/y while tobacco prices were down 5.1% y/y.

According to the zonal data, the northern regions of the country recorded the highest rate of inflation in January at 1.2% m/m and 2.6% y/y. The central region recorded the lowest inflation rate at 0.2% m/m and 1.0% y/y, while the mixed zone 3 covering the south, east and west of the country recorded inflation of 0.5% m/m and 2.5% y/y.

As the graph above depicts, Namibian annual inflation has been slowing almost consistently since November 2018, and is currently trending at levels last seen in 2005. January’s figure of 2.1% y/y is particularly low as a result of annual rental adjustments being put through. According to the NSA, the prices for the rental payments for dwellings sub-category declined by 1.5% y/y in January. As the tough economic conditions persist, it is ever more difficult for landlords to push up rental prices. As rental payments make up a large portion of the CPI basket, the deflationary adjustment means that Namibian annual inflation in 2020 is likely to be well below Namibia’s long run average. IJG’s inflation model forecasts an average inflation rate of 3.3% y/y in 2020. Lower expected inflation, coupled with low economic growth forecasts means that there is a lot of leeway for the Bank of Namibia’s MPC to cut the repo rate at its February meeting.

The Namibian annual inflation rate increased marginally to 2.6% in December, following the 2.5% y/y increase in prices recorded in December. Prices in the overall NCPI basket decreased by 0.1% m/m. The annual average inflation rate for 2019 was 3.7%, compare to 4.3% in 2018 and 6.2% in 2017. On a year-on-year basis, overall prices in seven of the twelve basket categories rose at a quicker rate in December than in November, with three categories recording slower rates of inflation and two categories recorded increases consistent with the prior month. Prices for goods increased by 2.0% y/y while prices for services increased by 3.4% y/y.

In December the housing and utilities category was once again the largest contributor to annual inflation due to its large weighting in the basket, accounting for 0.5 percentage points of the total 2.6% annual inflation rate. Price inflation for this category came in at 1.9% y/y for a third consecutive month and remained relatively flat month-on-month. Prices in the electricity, gas and other fuels subcategory remained flat m/m, but declined by 0.8% y/y. The regular maintenance and repair of dwellings subcategory registered an increase in prices of 5.0% y/y. Month-on-month, prices in this subcategory fell by 0.7%. Annual inflation for rental payments remained unchanged at 2.3% y/y in December.

The education basket recorded inflation of 12.0% y/y, with the cost of pre-primary and primary education growing at a rate of 12.6% y/y, while secondary- and tertiary education recorded price increases of 11.0% y/y and 12.7% y/y, respectively. All three subcategories printed no price increases on a month-on-month basis.

The alcohol and tobacco category displayed a decrease of 0.1% m/m, but an increase of 3.2% y/y. The main driver in this basket category was alcohol prices which increased by 4.9% y/y while tobacco prices were down 4.3% y/y.  A 7.8% m/m decrease in tobacco prices, recorded in May, is the cause for annual decrease in tobacco prices. The Namibia Statistics Agency (NSA) has not provided any explanation for this decrease in any of its bulletins since May.

The zonal data shows that prices fell by 0.3% m/m in the northern regions, and by 0.1% m/m in the east, south and western regions, while rising by 0.1% m/m in the central region. On an annual basis, the Central region recorded the lowest inflation rate at 2.2% in December, with the mixed zone 3 covering the south, east and west of the country recording the highest rate of inflation at 3.3%. Inflation in the northern region of the country increased to 2.5% y/y.

The Namibian annual inflation rate of 2.6% for December continues to trend lower than that of neighbouring South Africa’s November inflation figure of 3.6%. Inflationary pressure in Namibia has been particularly low in the second half of 2019 due to a lack of demand for both goods and services. IJG’s inflation model forecasts an average inflation rate of 3.5% y/y in 2020. The largest upside risk to this forecast is higher food costs and fuel prices. Although the northern and central regions received an encouraging amount of rainfall in December, large parts of the southern region are yet to receive their first rains. Food prices will likely increase if the country experiences another year of below average rainfall.

Geopolitical tension between the US and Iran seems to have calmed down (for the moment at least) and the price of Brent Crude oil has ‘normalised’ at US$64 at the time of writing after spiking to US$71 last week. However, peace in the middle east is all-but-certain and the situation can escalate within the wink of an eye, which will send the price of oil up again. Another potential risk for the oil price is if OPEC goes ahead with the implementation of its plan to cut production by 500,000 barrels per day. Such shocks in the oil price will result in the Ministry of Mines and Energy increasing fuel pump prices for Namibians which will translate into higher transport inflation.

The Namibian annual inflation rate slowed for a third consecutive month, moderating to 2.5% y/y in November, hitting the lowest levels since August 2005. Prices increased by 0.1% m/m. On an annual basis prices in four of the twelve basket categories rose at a quicker rate in November than in October, two categories recorded increases consistent with the prior month, while the annual rate of price increases in six categories slowed during the month of November. Prices for goods rose by 1.7% y/y while prices for services rose 3.4% y/y.

The housing and utilities category was the largest contributor to annual inflation in November due to its large weighting in the basket, accounting for 0.53 percentage points of the total 2.5% annual inflation rate. Price inflation for this category once again came in at 1.9% y/y but remained relatively flat month-on-month. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 5.0% y/y, which is a higher rate of increase than the 2.5% y/y registered the previous month. Month-on-month, prices in this subcategory increased by 2.2%. Prices in the electricity, gas and other fuels subcategory declined by 0.8% y/y. Annual inflation for rental payments remained unchanged at 2.3% y/y in November.

Food & non-alcoholic beverages, was the second largest contributor to annual inflation, accounting for 0.51 percentage points of the 2.5% annual inflation rate. Prices in this category increased by 0.4% m/m and 2.9% y/y. Prices in eleven of the thirteen sub-categories recorded increases on an annual basis, with the largest increases being observed in the prices of fruits and vegetables, recording price increases of 14.0% y/y and 14.4% y/y respectively. Meat prices decreased by 0.3% y/y, compared to the 1.9% y/y increase recorded in the previous month. Due to the ongoing drought there has been a large-scale slaughtering of cattle. This has reduced the number of livestock in the country and going forward meat prices will likely increase as restocking of farms will cause upward pressure on prices.

The education basket category recorded inflation of 12.0% y/y, with the cost of pre-primary and primary education growing at a rate of 12.6% y/y, while secondary- and tertiary education recorded price increases of 11.0% y/y and 12.7% y/y, respectively. All three subcategories printed no price increases on a month-on-month basis.

According to the zonal data, prices rose 0.5% m/m in the northern regions, but printed flat in the rest of the country on a monthly basis. On an annual basis, the Windhoek and surrounding area, recorded the lowest inflation rate at 2.0% in August, with the mixed zone 3 covering the south, east and west of the country recording the highest rate of inflation at 3.6% y/y. Inflation in the northern region of the country slowed to 2.1% y/y.

The Namibian annual inflation rate surprised further to the downside, slowing to 2.5% in November, and is trending well below South Africa’s November inflation figure of 3.6%. Inflationary pressure in Namibia remains low as gloomy domestic economic conditions translates to muted demand for both goods and services. IJG’s inflation model forecasts an average inflation rate of 3.8% y/y in 2019 and 3.5% y/y in 2020. The largest upside risk to this forecast is higher food costs as the drought affects local food production.